A Class Tax: Utah Taxpayers in 1920

The other day, I did a quick search on the Library of Congress’s Chronicling America site to see if I could find any information about prominent Utah or Mormon taxpayers.

See, today’s tight privacy of tax return information hasn’t always existed. For a couple of years in the 1920s, Congress required taxpayers to publicly disclose their tax payments; apparently, newspapers had a field day publishing the tax payments (and refunds) of the wealthy and the famous.[fn1] I was curious if Utah newspapers did the same.

But I got distracted on my first hit, from the Lehi Sun. It didn’t release the names of taxpayers, or what they paid, but it did give a snapshot of Utah’s taxpaying from 1916-1920.[fn2]

According to the Lehi Sun (and I’ve confirmed it with the Treasury Department’s Statistics of Income volume for 1920), 30,510 Utahns filed tax returns, reported net income of $82,278,389, and paid collective income taxes of $1,506,781.[fn3] In fact, the Sun provides this Utah data for four years:

 

 

 

 

There are a couple important things to note here. Those 30,510 returns filed in Utah in 1920? According to the Census, Utah’s 1920 population was 449,396. In other words, only about 6.79% of Utahns filed a return. Now, to some extent that makes sense: a significant percentage of Utahns were likely children, and I assume many people (including married women) weren’t earning income. Still, it seems like a tiny number. Why so small?

Largely because in 1920, the federal income was still a class tax. It wouldn’t become a mass tax (meaning, it wouldn’t affect most people) until World War II.[fn4] In fact, the Sun reports, nationally, about 6.85% of the population filed tax returns. Why so few? In 1920, the tax law provided for a personal exemption of $1,000 for an individual, $2,000 for a married couple, and an additional $200 per dependent. That means a family of 6 would have to earn $2,800 before they had to file a return or pay taxes.

If I really wanted to spend time, I’m sure I could find the median household income in 1920. It’s not coming up instantly in my Google searches, but the Census does tell me that in 1947—27 years after what I’m looking at—the median family earned $3,031. So median income in 1947 would be barely enough to require a family of six to file a tax return in 1920; that number would have been significantly smaller in 1920.

Another point: this doesn’t necessarily tell us a lot about Mormon income. 1920, it turns out, was a low point for the proportion of Mormons in Utah, having fallen to just 55%.[fn5] And the roughly 247,000 Mormons who lived in Utah represented about 47% of the church’s 525,987 members in 1920. So we have no way of knowing what proportion of the 30,510 Utah taxpayers Mormon. Moreover, even if we assume they all were, Utah Mormons’ income may not have been representative of Mormons at large—Mormons in Utah may have been richer or poorer than Mormons outside of Utah.

Finally, while taxpayers reported net income of a little over $82 million in 1920, that doesn’t mean that the average income in Utah was $182 (that is, total net income divided by residents). The income is only income from individuals who filed tax returns; it doesn’t take into account the income of the other 93% of Utahns.

Some other fun tax trivia from the 1920 Statistics on Income volume: Alaska had the highest percentage of taxpayers, with 18.03% of its population filing a return (which makes some sense, given that its population was just under 55,000 individuals, making it the smallest state by a lot). Meanwhile, with 1.56% filers, Mississippi had the lowest proportion.

Even though Alaska had the highest proportion of residents paying income taxes, it provided less federal revenue than any other state, with its residents paying only $248,605. New Yorkers paid the most in taxes, raising $286,607,280 in taxes. In fact, in 1920, New York paid 26.65% of the income taxes paid, while its population represented about 9.8% of the country’s population.

And how did Utah fare? Well, the $1.5 million Utahns paid in taxes represented 0.14% of federal income tax revenues in 1920. And Utah’s population represented 0.4% of the country’s population.

There are plenty of other things to tease out of the data. What did I miss? What do you see in the 1920s that’s interesting? Also, did Utah newspapers report on prominent Mormons’ or Utahns’ tax bills? (That would have been 1924 and 1925.)


[fn1] If you’re interested, John D. Rockefeller, Jr.’s 1924 tax bill of $6,277,669 was the biggest tax bill in the country in 1924, according to the New York Times. And that’s in 1924 dollars.

[fn2] The 16th Amendment was ratified, and the modern federal income tax was enacted, in 1913. So this is a snapshot of some of the earliest years of the modern federal income tax.

[fn3] It’s not an apples-to-apples comparison, because tax rates changed, but note that in 1920, Utahns collectively paid only 25% of the amount of taxes that Rockefeller paid personally four years later.

[fn4] I’m not sure who originated the terms class tax and mass tax, but I got them from Joseph Thorndike’s excellent book about the roots of the modern income tax.

[fn5] Dean May, “A Demographic Portrait of the Mormons, 1830-1980,” in New Mormon History, 125. Thanks to J. Stapley for getting me this information.

Comments

  1. Really interesting. Thanks, Sam. Do you have tithing receipts from that era to compare? (I don’t have time to look for it now, I recall there being enough public financial information in the first half of the 20th century that it’s not a totally dumb question.)

  2. Why did the number of returns double between 1917 and 1920? Was this true for other states?

  3. 1920 being the lowpoint of the twentieth-century Utah Mormon population, implies that non-Mormons had been moving to Utah for the previous 50 years at reasonably high rates. With the generally poor economy of Utah, could one assume that these non-Mormons were moving to Utah for economic reasons (railroad and mining?), and that they consequently had higher paying jobs than the largely rural Mormon population? That is making a lot of assumptions about demographics, data for which I am not familiar, but it is interesting to me. It is also to think about HJG becoming church president at the low point of Mormon population. Potentially interesting context for some of his changes.

  4. ChrisClarke, great question. It can at least partly be explained by the fact that the personal exemption for a married couple in 1916 was $4,000, not $2,000. But around 1917, Congress lowered the exemption and increased rates, in large part to help fund World War I.

  5. And J., those were kind of my thoughts: it would make sense for the non-Mormon population to be wealthier than the Mormon population. But that’s not based on anything concrete, so it may well be wrong.

  6. Heptaparaparshinokh says:

    J. and Sam: additionally, significant numbers of Mormons started leaving Utah for (Southern) California at this time, which became a torrent during the Depression and WWII. The agricultural economy of Utah was always much too small to support much of a population, and IIRC the drought that hit much of the Great Plains at this time and led to the Dust Bowl also hit the Intermountain West pretty hard.

    But yeah, there was pretty significant non-LDS migration into Utah probably until the ’20s. Brigham Young pretty much ordered the members not to go work in the mines (and many of the British converts had been coal miners in Wales and England and had no intention of going back into the pits), so the Price/Helper area in particular got a lot of immigrants, many of whom eventually migrated up to Salt Lake. My mother was born Greek Orthodox; her priest growing up in the Chicago area was born in Price.

  7. Thanks, Heptaparaparshinokh! Really interesting.

    And Chris, I thought I had tithing receipt numbers, but it turns out I don’t (or at least, I don’t in front of me).

  8. The president of the Union Pacific Railroad, Edward Henry Herriman, had enormous investments in Utah, so his widow was required to pay just under $800,000 in inheritance tax to the State of Utah in 1911. That financed the building of the State Capitol.

    That isn’t income tax, and it’s slightly before your charts, and it concerned only one man, and I don’t know how often anything like it was repeated, if ever, so maybe it’s entirely irrelevant. But it kinda sorta does hint at the effect of those non-Mormon residents and investors, and how even a single taxpayer in those largely from-out-of-state and presumably non-Mormon investment industries could skew the numbers.

    Come to think of it, alunite mining in Utah took off at exactly this time (Piute County, Utah was about the only place in the world able to supply critical potash while the rest of the world’s supply, controlled by Germany, was cut off by World War I), and that involved massive out-of-state investment, some of which would have shown up in the income tax returns of a few in-state but largely non-Mormon men with ties to that industry.

  9. Thanks, Ardis! The whole time I was reading/thinking about this, I realized that you could do it faster, better, and bring more knowledge to bear on it. But mostly, I thought this was a fun slice of (financial) Utah life, even if we have to work to figure out what story (if any) this tells us.

  10. Heptaparaparshinokh says:

    In general I think there’s an excellent story to be told about the struggle, going back to Young, to keep Utah from becoming merely a resource colony–and, later, a toxic waste dump–for the rest of the country. As recently as 30 years ago this still was a losing effort: the worldwide commodities collapse of the ’80s and then the end of the Cold War (which significantly reduced the demand for things like solid rocket fuel from Brigham City and explosives from Spanish Fork, with consequent economic multiplier effects) led to a pretty huge migration out of Utah of young people, of which lovely Deseret has always had an abundant supply.

  11. Last Lemming says:

    A few of other tidbits from the 1920 Statistics of Income:

    Of the 30,510 returns, over half (16,906) were joint returns. From that, we can calculate that net income per filing adult was $1,735.

    Of the 30,510 returns, 9,228 owed no income tax. Of the 21,282 who owned tax, 19,855 had income under $5,000 and 10 had income over $50,000. None had income above $100,000.

    77% of Utah income was wages and salaries, compared to $57% nationwide.

    Deductions are not broken out by type, but, Utah’s deductions (7.6% of gross income) was way behind the national average (11.1%). In addition to charitable contributions, those deductions included business expenses of sole proprietorships, personal interest expenses, state and local taxes, casualty and theft losses, bad debt writeoffs, and depreciation.

  12. from conference reports we learn that the church received $1,887,920 in tithes in 1914. In 1917, 87663 members were paying tithing. Treating those years as the “same” year, then tithe-paying members paid about $21.54 on average (unfortunately, this is a mean and not a median)